284 U.S.

534
52 S.Ct. 232
76 L.Ed. 469

STATE OF UTAH et al.

v.
UNITED STATES. CARBON COUNTY LAND CO. v. SAME.
Nos. 42, 43.
Argued Jan. 19, 20, 1932.
Decided Feb. 15, 1932.

[Syllabus from pages 534-536 intentionally omitted]

Mr. Wm. J. Donovan, of New York City, for petitioner State of utah.
Mr. Mahlon E. Wilson, of Salt Lake City, Utah, for petitioner Independent
Coal & Coke Co.
Mr. Samuel A. King, of Salt Lake City, Utah, for petitioner Carbon
County Land Co.
The Attorney General and Mr. Thomas D.
[Argument of Counsel from page 537 intentionally omitted] Thacher, Sol.
Gen., of Washington, D. C., for the United States.
Mr. Justice STONE delivered the opinion of the Court.

Certiorari was granted in these cases, 283 U. S. 816, 51 S. Ct. 658, 75 L. Ed.
1432, to review a decree of the Circuit Court of Appeals for the Tenth Circuit,
by which it reversed a decree of the District Court for Utah and adjudged that
the United States was entitled to certain lands described in the bill of complaint,
and that the petitioners' title to the land is impressed with a trust in favor of the
United States. It specifically decreed the cancellation of a certain mortgage and
of tax liens on the lands claimed by the state of Utah, and directed conveyance
of the lands and an accounting for their use by the other petitioners. (C. C. A.)
46 F.(2d) 980.

The sufficiency of the original bill of complaint was upheld and substantially
all the questions now presented were considered and determined by this Court
in Independent Coal & Coke Co. v. United States. 274 U. S. 640, 47 S. Ct. 714,
71 L. Ed. 1270. The suit was originally brought against the two corporate
petitioners and certain individuals, the state not being a party, and the
circumstances, so far as they then appeared, were set out in the opinion of this
Court as follows (pages 642-644 of 274 U. S., 47 S. Ct. 714, 715, 71 L. Ed.
1270):

'This is a second suit by the United States, and is in aid of the first, for the
restoration to the government of some 5,500 acres of public lands located in
Utah, title to which was procured by a fraud perpetrated upon the land officers
of the United States. The first suit, which resulted in a judgment for the
government (affirmed (Milner v. U. S. (C. C. A.)) 228 F. 431), was predicated
upon the following circumstances:

'The United States, in 1894, made a grant of public lands to the state of Utah to
aid in the establishment of an agricultural college, certain schools and asylums,
and for other purposes. Sections 8 and 10, Act of July 16, 1894, c. 138, 28 Stat.
107, 109, 110. Mineral lands were not included. See Milner v. United States (C.
C. A.) 228 F. 431, 439; United States v. Sweet, 245 U. S. 563, 38 S. Ct. 193, 62
L. Ed. 473; Mullan v. United States, 118 U. S. 271, 276, 6 S. Ct. 1041, 30 L.
Ed. 170; section 2318, R. S. (30 USCA 21). The grant was not of lands in
piece. Selections were to be made by the state with the approval of the
Secretary of the Interior, from unappropriated public lands, in such manner as
the Legislature should provide. The Legislature (Laws Utah 1896, c. 80) later
created a board of land commissioners, with general supervisory powers over
the disposition of the lands, and with authority to select particular lands under
the grants.

'During the period from December 10, 1900, to September 14, 1903, Milner
and others, the predecessors in interest of the Carbon County Land Company,
one of the petitioners, made several applications to the state commission to
select and obtain in the name of the state the lands now in question, and at the
same time entered into agreements with the commission to purchase the lands
from the state. In aid of the applications and agreements, milner and his
associates filed affidavits with the commission, stating that they were
acquainted with the character of these lands, which they affirmed were
nonmineral and did not contain deposits of coal. They also deposed that the
applications were not made for the purpose of fraudulently obtaining mineral
holdings, but to acquire the land for agricultural use. The applicants were

obviously aware that the affidavits or the information contained in them would
in due course be submitted to the Land Office of the United States with the
state commission's selections, as they were in fact. On the faith of these and
other documents, the selections were approved by the Secretary of the Interior
and the tracts in question were certified to the state on various dates, the last
being in December, 1904. Certification was the mode of passing title from the
United States to the state.
6

'In January, 1907, the United States brought the first suit, against Milner and
his associates and the Carbon County Land Company, which had been
organized by Milner to take over the land, and was controlled by him. The suit
was founded on the charge that the certifications were procured by the
fraudulent misrepresentations of Milner and the others, since they knew at the
time of the applications that the lands contained coal deposits. Although the bill
* * * sought the quieting of the government's title. It affirmatively appears that
on June 8, 1914, the District Court entered a decree declaring that the United
States 'is the owner' and 'entitled to the possession' of the lands in question and
that the defendants 'have no right, title, or interest, or right of possession,' and
perpetually enjoining them 'from setting up or making any claim to or upon said
premises.' The Circuit Court of Appeals, in affirming the decree, held that 'the
whole transaction was a scheme or conspiracy on the part of Milner to
fraudulently obtain the ownership of these lands from the United States."

In its first opinion, this Court held, for reasons stated and upon authorities cited,
that the decree in the earlier suit conclusively established that the Carbon
County Land Company was a party to the fraudulent conspiracy to procure
certification of the title to the lands to the state; that as against the land
company and all claiming under it, the United States was equitably entitled to
the land; that the land company, so far as it had acquired any interest in the
land, was not shielded from the consequence of its fraud by having procured a
conveyance to the state, even though the latter was not a party to the fraud; and
that the land company could not acquire any further interest in the property
from the state free of the obligation to make restitution of it, which equity
imposes on one who despoils another of his property by fraud. Independent
Coal & Coke Co. v. United States, supra, pages 647, 648 of 274 U. S., 47 S. Ct.
714, 71 L. Ed. 1432.

As the Independent Coal & Coke Company had acquired its alleged interest in
the lands subsequent to their certification by the United States, it was held that
it took them subject to the equities of the United States, unless the defense of
bona fide purchaser was affirmatively established, and 'that none of the
defendants, nor any claiming under them with notice, could by any legal device,

however ingenious, acquire title from the state free from the taint of their fraud.'
Id. pages 646, 647 of 274 U. S., 47 S. Ct. 714, 717, 71 L. Ed. 1432.
9

After the cause had been remanded to the District Court, the two corporate
petitioners answered, and the state, which had contented itself with filing a brief
amicus curiae when the cause was first here, was permitted to intervene. By its
bill of complaint in intervention the state set up that at the time of the selection
and certification of the lands it 'believed and had ever since believed that the
land so certified by it was agricultural in character and it did not contain any
known mineral'; that in 1920, which was subsequent to the decree in the first
suit, it had entered into a new contract with the land company, under which it
had sold and conveyed the lands to that company for $100 an acre, or a total of
$556,428, taking back a mortgage for that amount, and had since assessed
taxes, which were liens upon the lands, aggregating $40,000. The government,
by its answer, prayed the cancellation of the mortgage and tax liens, or, in the
alternative, if that relief were denied, that the certification of the lands of the
state by the United States be canceled.

10

After a trial upon evidence, the district court, without making findings, gave
judgment canceling the patent from the state of the land company and quieting
the state's title. The Court of Appeals, in reversing this decree, made findings,
which the evidence supports, that the state, as alleged, had, in 1920, patented
the lands to the Carbon County Land Company, taking back a mortgage for the
purchase price, and that in the same year the land company had sold 1,120
acres of the land to the Independent Coal & Coke Company, which had notice
of all the proceedings, including the final decree in the first suit.

11

Upon these findings, it is apparent, from our earlier opinion, that neither of the
corporate petitioners can retain any interest in the land, as against the United
States. As the coal company purchased a part of the lands with notice of the
equities of the United States against the land company, it took subject to those
equities, and can be in no better position with respect to them than its grantor.
The land company, a party to the fraud by which the certification of the lands
to the state was procured, and to the decree in the first suit which so
determined, could not improve its position by taking any further conveyance
from the state. However innocent the state and its officials may have been in
this transaction, any interest the land company could acquire from the state in
its own behalf was but the fruit of its fraud and of its violation of the decree
against it. This aspect of the case was discussed and passed upon in our first
opinion, pages 647, 648, 649 of 274 U. S., 47 S. Ct. 714, 71 L. Ed. 1432, and
the conclusion there reached requires affirmance of the decree so far as it
affects the land company and the coal company.

12

The state of Utah can stand in no better situation with respect to the mortgage
and tax liens which it asserts. A copy of the bill of complaint in the original suit
was handed to the state board of land commissioners when the suit was begun
in 1907, and the state has been fully advised of all the subsequent proceedings.
By 1904 it had contracted to sell the lands to Milner and associates for $1.50 an
acre, payable in installments of 25 cents a year. By virtue of these contracts, the
vendees were equitably entitled to the land, and the state's interest was but that
of vendor, having the mere right to retain the title as security for any unpaid
balance of the agreed purchase price. See Williams v. United States, 138 U. S.
514, 516, 11 S. Ct. 457, 34 L. Ed. 1026; Boone v. Chiles, 10 Pet. 177, 224, 9 L.
Ed. 388. It was the equitable ownership in the lands thus acquired by Milner
and associates and conveyed by them to the land company which the decree in
the first suit, in 1914, adjudged to be in the United States.

13

The government's allegation in its answer to the intervention complaint of the

state that at the time of the decree the purchase price had been paid in full was
not denied by the state's replication. No evidence on the point was offered, but
in the present circumstances we do not think it material. Subject to the state's
security title and right as vendor, every interest in the land was vested in the
land company, whose rights remained unchallenged and unaffected by any
action of the state when the decree was entered in the first suit. That decree
irrevocably fastened the equities of the United States upon every right and
interest which the land company had or could procure in the land. So far as the
state was concerned, the decree substituted the United States in the place and
stead of the land company as equitable owner of the land, and stripped the
latter of power of surrender its interest to the state. The decree1 was likewise of
binding force upon everyone, including the state, who might later knowingly
attempt to acquire any new or different interest in the land in derogation of the
equities adjudged to be in the United States. Even if we were to assume that, at
the time of the decree there was an unpaid balance of purchase money (which
could not have exceeded $1.50 an acre), the state was entitled only to retain its
title until payment was made. Beyond this it could make no profit and derive
no benefit free of the equitable rights of the United States. Any grant of the
lands by the state to the Land Company or to a stranger, without the assent of
the United States, would have been in violation of its equitable rights as they
had been adjudicated by the decree. See Gorham v. Farson, 119 Ill. 425, 10 N.
E. 1; Haughwout v. Murphy, 22 N. J. Eq. 531, 546, 547; Taylor v. Kelly, 56 N.
C. 240.

14

Ignoring those rights, the state issued a patent to the land company, receiving as
the proceeds of its wrongful conveyance the mortgage of the land company, an
active participant in the fraudulent scheme, to secure the increased payments of

$100 an acre. It actively facilitated the conveyance to the coal company by the
land company by agreeing with both that the state would release from the
mortgage the lands conveyed to the coal company upon payment of $112,000,
which the coal company undertook to pay. This attempted enlargement of the
state's interest in the lands, in diminution of the equities of the United States,
like the conveyance, mortgage, and agreement by which the attempt was made,
was a violation of the decree and of the equitable rights confirmed by it, from
which the state can take no benefit. This is not any the less the case because the
land company, as against the United States, could not rightly receive the patent
or retain its benefits or grant to any other than the United States any interest in
the patented lands.
15

The state urges that the United States is estopped to assert any claim to the
lands as against it by statements made by a Special Assistant Attorney General
in a conversation between him and members of the board of land
commissioners in 1907, when he delivered to them a copy of the bill of
complaint in the first suit. We agree with the court below that his statements
cannot be regarded as so inconsistent with the bill as to form any basis for the
alleged estoppel. In any case, he was obviously without authority to dispose of
the lands, and could not estop it from asserting rights of the United States in its
mineral rights which he could not surrender. Utah Power & Light Co. v. United
States, 243 U. S. 389, 408, 409, 37 S. Ct. 387, 61 L. Ed. 791. See, also, San
Pedro and Canon del Agua Co. v. United States, 146 U. S. 120, 131 et seq., 13
S. Ct. 94, 36 L. Ed. 911.

16

It is also argued that the lands were not mineral lands, and that the adjudication
to that effect in the first suit is not res adjudicata as to the state. That question
was again litigated in the present suit, and upon this issue the court below, upon
sufficient evidence, found in favor of the United States. See Diamond Coal &
Coke Co. v. United States, 233 U. S. 236, 34 S. Ct. 507, 58 L. Ed. 936. But we
do not think that question requires our examination or is open upon the present
record. The decree in the first suit adjudicated the equitable rights of the United
States as against the corporate petitioners. For reasons already stated, the state
has at no time had or asserted any interest superior to that of the United States,
except its vendor's title, which it has since relinquished to the land company.

17

In our first opinion we held that the six-year statute of limitation of actions to
cancel patents granted by the United States (43 USCA 1166), even if
embracing a suit brought for cancellation of a certification of lands by the
United States, had no application to the relief sought against the corporate
petitioners. For the same reason it can have none to the relief granted against
the state in accordance with the prayer of the bill. The present suit did not seek

cancellation of the certification, unless that prayer was denied. It asserts

equitable rights to interests in the land derived under and by virtue of the
certification. The decree proceeds, and is affirmed here, on the ground that the
mortgage and tax liens asserted by the state are subordinate to those rights.
18

We have considered, but find it unnecessary to discuss, other objections to the

decree.

19

Affirmed.

The decree provided 'That the plaintiff (the United States) is the owner and
entitled to possession of the following described property, towit: * * * and that
plaintiff's title thereto be quieted against any and all claims of the defendants, or
either of them or of any person or persons claiming, or hereafter to claim
through or under the said defendants, or any or either of them; that said
defendants, and each of them, have no right, title or interest, or right of
possession in or to said premises hereinabove described, or to any part thereof;
and the said defendants, and each of them, are perpetually restrained and
enjoined from setting up or making any claim to or upon said premises, or any
part thereof, and all claims of said defendants, and each of them, are hereby
quieted.'